Nov 24, 2021 – 5.35pmSalt Lake Potash (SO4) directors declared the company insolvent and its creditors appointed KordaMentha as receiver and manager over the top of administrators KPMG on October 20.
Those creditors included the Clean Energy Finance Corporation (or we, the taxpayer) to the tune of $US47 million ($65 million).
The 54.6 million shares – a 9.7 per cent stake – of Salt Lake’s largest shareholder, funds giant Fidelity International, are almost certainly worthless.
Fidelity first hit the SO4 register in August 2019, taking 10.6 million shares at 70¢ each in an exclusive placement. It continued buying – on market and in further placements – right up until August 2020.
Salt Lake was set to be Australia’s first domestic potash producer when it rushed to enter production at its Lake Way project in Western Australia June.
In the immortal words of chief executive Tony Swiericzuklast November, “We’re not mining hard rock, we’re not drilling [or] blasting, we’re not digging great holes in the ground … it’s very, very different from normal mining. I don’t want to play it down too much, but it’s quite simple.”
Production at Lake Way suffered immediate technical problems. Investors ultimately declined to rescue the developer, which had already raised $507 million of debt and equity in 11 raisings since its backdoor listing in June 2015 via ASX-listed shell Wildhorse Energy.
In that transaction, the owners of Australian Salt Lake Potash Pty Ltd swapped their Lake Way interest for Wildhorse shares and Wildhorse changed its name to Salt Lake Potash.
ASLP was tightly held, with just three vendors. One was Howitt MGMT, a private holding company of Dig Howitt, the chief executive of Cochlear, and Kate Howitt, portfolio manager at Fidelity International.
Howitt got set personally in SO4 at 10¢ per share – the 2015 annual report has Howitt MGMT as seventh-largest shareholder with 4.62 million listed securities and another 6.93 million unquoted performance shares – more than four years before Fidelity came blazing in at far higher prices.
By August 2020, the Howitts were its 12th-largest holder with 5.02 million shares, diluted to 1 per cent of shares on issue.
Fidelity and the Howitts have both ended up with the same exit price, being zero. Receivership is a great leveller for equity holders.
It’s a delicate practice, fund managers holding PA investments in stocks their funds are also invested in. Fidelity International assured us it “has robust compliance policies and procedures in place for managing activities such as personal trading which apply to all staff, including portfolio managers.” Which is a whole lot more than we ever got out of iSignthis shareholders Marcus Hughes and Stephen Aboud of LHC Capital!
Kate Howitt would be an accomplished conflict manager merely on the basis Fidelity funds own 0.44 per cent of Cochlear, where her husband has worked for more than 20 years.
Howitt’s conflict in Salt Lake Potash would be a breeze compared with the one afflicting chairman Ian Middlemas. He also chairs Equatorial Resources, which from July last year outlaid $15 million on shares in Salt Lake to be – at time of death – its sixth-largest shareholder. In its September quarter update last month, Equatorial wrote its Salt Lake shareholding down to zero.
That was a seriously loose punt, given Equatorial needs $US1.2 billion to develop its Badondo iron ore project in the Republic of the Congo (on the non-democratic side of the river from Andrew Forrest’s hallucinatory green power mega-project). Equatorial has $20 million of cash remaining.
